Tuesday, April 11, 2017

lack of substantiation isn't actionable, but claims of 100% satisfaction are

Plaintiffs brought the usual California claims (plus RICO
and California’s Health and Safety Code section 24170, et seq., (Human
Experimentation) (!), and Financial Elder Abuse), based on allegedly false
advertising of “stem cell treatments” to consumers who are often “sick or
disabled, suffering from incurable diseases and a dearth of hope.” Defendants
allegedly falsely represented to consumers that “100% of its prior consumers
are satisfied with its service.”

The court first found that claims based on lack of
substantiation weren’t sustainable.
Plaintiffs undamentally alleged omission of the material information
that no data or reasonable basis supported the efficacy of the stem cell
treatments. “False-advertising claims based on a lack of substantiation, rather
than provable falsehood, are not cognizable under the California
consumer-protection laws.” The closest
the plaintiffs got to alleging falsity was “the generally accepted scientific
consensus is that there is no treatment for degenerative diseases, or any
disease, with a person’s own adult adipose stem cells, that has been proven ‘effective’
at any level.” But is that true because the treatment has been “tested and
disproven, or rather, is it because no study regarding its efficacy has been
conducted yet, and thus, scientific literature is devoid of a conclusion?” Plaintiffs didn’t plead the existence of any
scientific study that purported to prove that the stem cell procedure didn’t
work.

However, claims about misrepresentation of patient
satisfaction ratings survived. Defendants represented that their patient
satisfaction ratings were monitored and updated on a monthly basis, but
plaintiffs alleged that the publicized ratings remained at 100% even after
complaints from customers.

However, the claim for financial elder abuse failed to
satisfy Rule 9(b). Also, “an elder
prospective customer viewing the website on his or her own volition is not
enough to constitute ‘undue influence,’” one of the elements. Plaintiffs also argued that defendants engaged
in human experimentation without informed consent because defendants referred to
their treatments as “studies” and claimed to be a “pioneer in research.” To
qualify as a “medical experiment,” the use of a device must be “in the practice
or research of medicine in a manner not reasonably related to maintaining or
improving the health of the subject or otherwise directly benefiting the
subject.” Thus, the stem cell treatments fell outside the ambit of “pure
research.” The innovative nature of the
treatment didn’t rise to the level of requiring informed consent. [This seems like a pretty big loophole. What about malpractice?]

The RICO claim failed because it was a RICO claim, but with leave to amend.

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